This is our love. This is our life. This is our home, Louisiana.

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1 This is our love. This is our life. This is our home, Louisiana. Our Home, Louisiana Blue Cross and Blue Shield of Louisiana 2005 Annual Report

A Message from the President Gery J. Barry President and CEO My family relocated to Louisiana just 18 months ago. During our first 10 months here, we learned a lot about our new state.

2 A Message from the President Gery J. Barry President and CEO My family relocated to Louisiana just 18 months ago. During our first 10 months here, we learned a lot about our new state. But it was the intense experience of hurricanes Katrina and Rita that taught us what s so special about Louisiana. The storms themselves were great equalizers both for the trauma they inflicted and for the drama they spawned. Heroic people from every walk of life instinctively set aside their own concerns and their own comfort to help others and to help salvage the communities and institutions to which they belonged. The experience of living and working here during this time has been profound, and it has already become a part of who I am. Wherever I travel, I m proud to say that I m from Louisiana. I am proud, too, of our company and how we responded. In the face of the enormous uncertainty wrought by the storms and to deal with circumstances where normal policies and procedures no longer applied, we quickly and without reservation made emergency decisions based solely on what our 1 million members would have wanted us to do. These quick decisions secured much-needed access to health care for our members throughout these trying times and paved the way for the state s emergency rules for keeping health insurance programs in place for all who were affected. Special policies and procedures are one thing, but putting them into practice is another. Here our employees excelled. Through their expertise, determination and concern for their fellow Louisianians, they got the job done, going well beyond their normal call of duty to help in any way they could. You ll read just a few of their stories in this report. Even as we continue to recover from these tragic events, we must plan for our future and for how we will rebuild. I was therefore delighted to be asked to serve on the Public Health and Healthcare Task Force of the Louisiana Recovery Authority, the planning and coordinating body created by Gov. Kathleen Blanco for the recovery and rebuilding of Louisiana. My assignment was to lead a workgroup on redesigning the health care system in our state. Our workgroup has now evolved into the Louisiana Health Care Redesign Collaborative, headed by Dr. Fred Cerise, Secretary of the Louisiana Department of Health and Hospitals, with whom I continue to work closely. It is my fervent hope that, by bringing together the vast store of expertise and good will of all constituents, we can design and implement a much better health care system for all. My participation in the Louisiana Health Care Redesign Collaborative, and the special initiatives being undertaken by Blue Cross itself to help rebuild health care in our state, spring directly from our company s new mission: To improve the lives of Louisianians by providing health guidance and affordable access to quality care. None of us could have foreseen just how timely the development of this new mission statement would prove to be. One of our key initiatives for 2005 was to develop a 2010 Vision for where we want the company to go. To do this well, we knew we needed to have a clear mission statement, expressed in simple terms. Employees from all levels of the company, from Board members to front line employees, contributed to its creation. The result, established several months before Katrina, was the compelling statement cited above.this mission statement and our commitment to it served us well throughout the uncertain times that ensued.

3 Driven by this mission, we ve now set a course for our company whereby by 2010 we will have improved the lives of Louisianians in four fundamental ways: 1) by helping to improve the quality of health care in Louisiana; 2) by helping to make insured access to care more universal; 3) by helping to make health care and health insurance more affordable; and 4) by helping to differentiate the health care and health guidance people receive according to their personal needs and values. But we re not waiting until 2010 for all this to happen. In 2005, despite the enormous disruption caused by the hurricanes, we accomplished all key initiatives built into our Business Plan, including the first installation of our new core computer system and our company s successful participation in the new Medicare Part D program. At the same time, new sales and membership retention have remained strong despite the hurricanes. We ended 2005 with more than 1 million medical members. And on the financial side, we ended the year stronger than ever as well. All of this goes to say that we ll continue to be here, working for you, when you need us. In the same way, we at Blue Cross and Blue Shield of Louisiana together with those we serve will continue to work, in good times and bad, toward the day that our state and our health care system are better and stronger than ever. We will not rest in the pursuit of this mission. This is our commitment, because this is our home Louisiana.

4 Louisiana Health Service & Indemnity Company and Subsidiaries Five-Year Comparative Statement (In Thousands) ASSETS Cash and Investments $319,568 $396,623 $473,361 $572,134 $667,088 Premium Receivable 6,640 5,271 5,612 6,358 17,137 Other Assets, Including Real Estate 105, , , , ,791 TOTAL ASSETS $432,098 $512,036 $599,449 $706,965 $815,016 LIABILITIES AND SURPLUS Policyholder Liabilities $132,696 $158,484 $167,322 $188,327 $189,690 Unearned Premium 25,681 29,769 32,826 37,318 23,561 Deposits and Other Liabilities 111, , , , ,178 TOTAL LIABILITIES $269,690 $304,288 $328,379 $354,225 $362,429 SURPLUS 162, , ,070 $352,740 $452,587 TOTAL LIABILITIES AND SURPLUS $432,098 $512,036 $599,449 $706,965 $815,016 Presented in accordance with Generally Accepted Accounting Principles restated to conform to the 2004 presentation. Louisiana Health Service & Indemnity Company and Subsidiaries Members Served Number of medical members as of December 31 of corresponding year*: , , , ,947 1,018,150 *Includes subsidiaries HMO Louisiana, Inc., Southern National Life Insurance Company, Inc. and BlueCard members, independent licensees of the Blue Cross and Blue Shield Association 4

5 Louisiana Health Service & Indemnity Company and Subsidiaries Consolidated Income Statements (In Millions) Premium Income $963 $1,174 $1,351 $1,497 $1,626 Claims Expense ,072 1,218 1,302 GROSS MARGIN $193 $235 $279 $279 $324 Service Revenue and Other Income Commissions Administrative Expenses Operating Income w/o Strategic Projects Strategic Projects Expense NET OPERATING INCOME $34 $38 $48 $64 $119 Investment Income PRE-TAX INCOME $49 $57 $67 $86 $149 Income Taxes NET INCOME $35 $43 $58 $81 $111 Presented in accordance with Generally Accepted Accounting Principles. Prior years have been restated for comparative purposes. 5

Board Executive team Blue Cross and Blue Shield of Louisiana Board of Directors (pictured above) Top Row (left to right) Thad D. Minaldi; Charles Brent McCoy; Frances T. Henry; Michael B.

6 Board Executive team Blue Cross and Blue Shield of Louisiana Board of Directors (pictured above) Top Row (left to right) Thad D. Minaldi; Charles Brent McCoy; Frances T. Henry; Michael B. Bruno; Kathy E. Sellers-Johnson, Vice-Chair; Robert E. Brooks; H. Claude DeBeaux, Jr.; Carl S. Luikart, M.D., F.A.C.C. Bottom Row (left to right) Sybil H. Morial; Gery J. Barry; Ann H. Knapp, Secretary; Virgil Robinson, Jr., Chairman; C. Richard Atkins, D.D.S. Executive Team Gery J. Barry, President and Chief Executive Officer; Michele Calandro, Senior Vice President and General Counsel; James J. Carney, M.D.,Vice President and Chief Medical Officer; Mike Hayes, Senior Vice President Benefits Administration; Sabrina Heltz, Senior Vice President Medical Economics; Pamela MacIntyre, Senior Vice President Human Resources; Mike Reitz, Senior Vice President and Chief Marketing Officer; Peggy Scott, Executive Vice President and Chief Financial Officer; Brian Small, Vice President and Chief Actuary; Ob Soonthornsima, Senior Vice President and Chief Information Officer; Richard Williams, Senior Vice President Provider and Community Relations

7 CORPORATE HEADQUARTERS: 5525 Reitz Avenue Baton Rouge, LA Phone: SUBSIDIARIES: HMO Louisiana, Inc Reitz Avenue Baton Rouge, LA Phone: Southern National Life Insurance Company, Inc Corporate Boulevard Baton Rouge, LA Phone: Blue Cross and Blue Shield of Louisiana Foundation 5525 Reitz Avenue Baton Rouge, LA Phone: DISTRICT OFFICES: Alexandria 5417 Jackson Street Extension, Suite B Alexandria, LA Phone: Group Sales: Individual Sales: Baton Rouge 5321 Corporate Boulevard Baton Rouge, LA Phone: Group Sales: Individual Sales: Houma 1437 St. Charles Street, Suite 135 Houma, LA Phone: Group Sales: Individual Sales: Lafayette 2701 Johnston Street, Suite 200 Lafayette, LA Phone: Group Sales: Individual Sales: Lake Charles 219 W. Prien Lake Road Lake Charles, LA Phone: Group Sales: Individual Sales: Monroe 3130 Mercedes Drive Monroe, LA Phone: Group Sales: Individual Sales: New Orleans 3501 North Causeway Boulevard, Suite 600 Metairie, LA Phone: Group Sales: Individual Sales: Shreveport One Bellemead Centre 6425 Youree Drive, Suite 300 Shreveport, LA Phone: Group Sales: Individual Sales:

8 An independent licensee of the Blue Cross and Blue Shield Association. 23XX2575 R6/06 Blue Cross and Blue Shield of Louisiana incorporated as Louisiana Health Service & Indemnity Company

Physician Availability in Greater New Orleans: Two Years after Hurricane Katrina. EMBARGOED FOR RELEASE UNTIL: Monday, Oct.

Physician Availability in Greater New Orleans: Two Years after Hurricane Katrina EMBARGOED FOR RELEASE UNTIL: Monday, Oct. 1, 2007 A white paper presented by Blue Cross and Blue Shield of Louisiana Gery